Month June 2012

The rate of activations has been increasing steadily which leads to a question: how high can it go?

The answer is easy to determine. It can go no higher than the sales rate of phones and tablets and PCs. So what’s that sales rate? The answer is to take sales (shipments actually) per category and cast the data as “activations”.

The result is shown in the chart below:

Defined as “activations” device and computers are being adopted at the rate of about 5.6 million units per day.

Dan and Horace reflect on the Osbourne effect of Windows Phone 8 on Nokia and how to value a company in distress. In particular, we talk about the potential of a Microsoft acquisition and the conditions needed to make it happen. Horace takes two reader questions: How did Samsung succeed while other vendors failed with Android and what are the pitfalls that could cause Apple to stumble.

This week Mr. Dediu was a guest on The Web Ahead (another 5by5 show hosted by Jen Simmons) where he discussed how the forces of disruption apply to the web. It was an interesting discussion as usual, but if you’re pressed for time you should turn your attention to the bit after the sixty-five minute mark, when Horace volunteers some of his thoughts on the web vs. native application platforms.

Today I was a guest on Jen Simmons’ The Web Ahead. It was a chance to discuss some of the big questions facing the Web in general especially vis-à-vis apps and mobile in general.

How can we understand the business of the web? Horace Dediu joins Jen to talk about the web through the lens of disruption theory, discussing innovation and jobs to be done. Along the way we get into advertisement on the web, and the old website vs native app debate.

There is no shortage of information about what happens to companies in distress. The cause of distress varies widely and is often not well understood but the actions and symptoms of distress are very consistent. We can look at examples in each industry, even in each product category for a rich set of distressed company data.

For over a year I’ve been chronicling the decline of incumbents in the mobile phone industry. However, decline cannot continue indefinitely. At some point a company “exits” the industry. Either through a sale or divestiture or, rarely bankruptcy. The list of exits is already long. The length and the correlation between exit and the lack of recovery implies that Nokia will also exit.

But how, exactly?

Will Nokia be acquired? If so, then by whom? What other options exist? How can we analyze this?

In the five years since the iPhone launched, Apple created a total of 35,852 retail jobs.

Some of those jobs came from new store openings. The total store count went from 172 to 361, more than doubling. But the growth in employment was faster: from about 6400 to 42,200, more than quintupling. This is reflected in the total number of employees per store which increased from 37 in Q1 2007 to 117 in Q1 2012.

Which brings up an obvious question: Why did Apple triple employment at each store?

HD: Apps are like the sauce in a dish. They add flavor and distinguish the dish. Increasingly they also offer nourishment. Some would argue that we can live with plain cooking but spices drove people to do incredible things like risking life to discover new continents. Being the world’s best source for spices means the most innovative and brilliant minds will be attracted to innovate on top of Apple’s platforms.

Sarah wakes up, prepares a full breakfast, and fires up her standard suite for design. Two new, time-consuming projects this week — it’s time to start planning much further than was previously warranted. Should’ve started yesterday.

OmniPlan for iPad is perfect for this. An intuitive interface keeps unnecessary controls out of your way until you need them, and you don’t have to become an expert in another field.

It’s just Sarah, three months of work, and a beautiful timeline to keep her studio of one on track. Available in the App Store for $50.

Horace and Dan look at Microsoft’s Surface through disruption colored lenses. First, the ongoing evolution of the computing value chain and how it foretold us of Surface. Second, how the economics of Microsoft’s businesses makes Surface compelling. We also begin a new segment tentatively called “Reader Questions”. This time it’s education: is it disruptable? If so how can we tell and where will it lead us?

As previously noted, Apple has overtaken Microsoft (and Google) in operating margin percentage. This is an astonishing statistic as Apple is still largely perceived to be a “hardware company” while Microsoft is a “software company” and Google is a “services company.”

To suggest that “hardware” could be more operationally profitable than either software or services is akin to heresy in technology analysis. This reversal is newsworthy indeed. However, even the most casual observer would note that Apple does not derive its market power from hardware alone. It is, in fact, an integrated hardware, software and services company (with a few more roles besides.)

So the emergent successful business architecture in this technologically transitional period is of integration and completeness of solutions.

This shift explains at least at a conceptual level Microsoft’s tectonic Surface shift.

But what about another point of view? What does integration mean for Microsoft’s income, cost and profit structure? Is integration self-disruptive to Microsoft?

Here’s a reminder of Microsoft’s revenues and operating income by division:

The challenge of devices for Microsoft is that the licensing of software for devices is very difficult to sell.